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bija089 [108]
3 years ago
6

"Stock in Daenerys Industries has a beta of 0.73. The market risk premium is 10 percent, and T-bills are currently yielding 5 pe

rcent. The company's most recent dividend was $1.6 per share, and dividends are expected to grow at a 5.5 percent annual rate indefinitely. If the stock sells for $35 per share, what is your best estimate of the company's cost of equity? Use the average from CAPM and Dividend Growth Model calculations."
Business
1 answer:
ololo11 [35]3 years ago
8 0

Answer:

CAPM = 12.30%

Dividend Growth Model=  10.32%

Explanation:

According to the capital asset price model: Expected rate of return = risk free + beta x (market premium)

5% + (0.73 x 10%) = 12.30%

according to the constant dividend growth model

price = d1 / (r - g)

d1 = next dividend to be paid

r = cost of equity

g = growth rate

$35 = $1.6 x (1.055) / (r - 0.055)

r = 1.688 / 35 + 0.055 = 0.1032 = 10.32%

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A policy of permitting the people of a country to buy and sell where they please, without restrictions, is called:
jeyben [28]

Answer: free trade

Explanation:

A policy of permitting the people of a country to buy and sell where they please, without restrictions, is referred to as the free trade.

Free trade allows countries interact with one another and trade the foods and services that they've.

6 0
3 years ago
Glenda is in the ninth grade, and she loves to write and share events that take place around her. She wants to become a journali
madam [21]

Answer:

D

Explanation:

This will help her develop journalism skills at a younger age

4 0
3 years ago
investment is made at r percent compounded annually, at the end of n years it will have grown to A = P(1 + r)n . An investment m
bixtya [17]

Answer:

$1,500

Explanation:

Given the compounding formula A = P(1+r)^{n}

And given an investment (P), made at 16% compounded annually (r), and an ending amount of $1,740 (A) at the end of the year (n = 1 year), the original amount invested (P) can be computed as follows.

1,740 = P(1+0.16)^{1}

1,740 = P * 1.16

= P = 1,740/1.16 = 1,500.

Therefore, the original investment was $1,500.

3 0
3 years ago
You are offered a chance to buy an asset for $4,500 that is expected to produce cash flows of $750 at the end of Year 1, $1,000
zzz [600]

Answer:

<em>a. 22.64%</em>

Explanation:

At first we are going to need to compute the Internal rate of return(IRR) (in which the current value of inflows = the current value of outflows)

Let's let the IRR be <em>x percent</em>

Therefore $4,500 = $750 / (1.0x)

+ $1,000 / (1.0x) <em>power 2</em> + $850 / (1.0x) <em>power 3 </em>

+ $6,250 / (1.0x) <em>power 4</em>

Thus, x = approximate return rate = <em>22.64 percent</em>

6 0
3 years ago
A product-focused process is commonly used to produce "A. high-volume, high-variety products" "B.low-volume, high-variety produc
ki77a [65]

Answer: Option C  

                                                                       

Explanation: In simple words, product focused process refers to the processes that focuses on producing the batch of similar products. These processes are usually used to manufacture products like paper rolls and light bulbs.

Under this process large units are produced of a similar product. Such processes require high fixed cost and low variable cost.

From the above we can conclude that the correct option is C.

8 0
3 years ago
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